Answer Question

1. The annual demand for refrigerators has been about 8,000 units a year and constant throughout the year.Assuming there are 250 working days per year, what is the daily demand of this product?

2. The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically correct office chair which costs $300. The annual holding cost rate is 40%, annual demand is 900, and the order cost is $20 per order. The lead time is 4 days. Because demand is variable (standard deviation of daily demand is 2.4 chairs), PCE has decided to establish a customer service level of 90%. The store is open 300 days per year.

a. What is the optimal order quantity?

b. What is the safety stock?

c. What is the reorder point?

3. A local artisan uses supplies purchased from an overseas supplier. The owner believes the assumptions of the EOQ model are met reasonably well. Minimization of inventory costs is her objective. Relevant data, from the files of the craft firm, are annual demand (D) = 150 units, ordering cost (S) = $42 per order, and holding cost (H) = $4 per unit per year.

a. How many should she order at one time?

b. How many times per year will she replenish her inventory of this material?

c. What will be the total annual inventory costs associated with this material?

d. If she discovered that the carrying cost had been overstated, and was in reality only $1 per unit per year, what is the corrected value of EOQ?

1) Consider the following bill of material. Fifty units of Product A are needed. Assuming no on-hand inventory, explode the bill of material.

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